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Why Rental Units May Be The Next Victims In The Foreclosure Crisis?

Posted By admin || 19-Jan-2010

The Dallas-Fort Worth area is experiencing the highest vacancy rates for its apartment communities in about 20 years. Only 88.8 percent of Dallas-Fort Worth apartments were rented in 2009, compared to 91.6 percent rented in 2008, which could spell imminent foreclosure for many landlords.

You might suspect that homeowners who suffered foreclosure would move into apartments thus boosting the occupancy rate; but the reality is that many of those individuals move into the homes of family and friends instead. Also, with the unemployment rate still high, many Dallas-Fort Worth residents cannot afford to rent an apartment especially if they have recently experienced a foreclosure . And amongst those who can afford to rent an apartment, many are taking advantage of the foreclosure crisis to purchase low-priced homes if they have good credit and enough cash. As we have reported previously, the commercial real estate foreclosure crisis is already underway and gaining steam each month.

Interestingly enough, it is the apartment industry that is being hit particularly hard as companies who own several apartment communities get hit by a combination of contracting credit, low vacancy rates, and renters who are unable to continue leases due to a job loss. If they are not already in foreclosure, many are on the brink of foreclosure.

One niche of the apartment industry you don't hear much about are small, private owners. Small, private owners, who are usually individuals who own a building or two, are very vulnerable to foreclosure because they don't have the leverage or relationships that will get them easy access to credit and flexible terms needed to survive this recession. Unfortunately, many individual landlords may end up losing their properties to foreclosure if they don't have enough cash reserves.